ACIT-2(1)(1), MUMBAI V. BLUE CIRCLE SPECIALITY CHEMICALS PVT. LTD., MUMBAI

ITA 246/MUM/2024

AI Insights

The case revolves around an appeal by the Revenue against the order of the CIT(A), which had deleted an addition of Rs. 2.50 crores made by the Assessing Officer under section 68 of the Income-tax Act. The addition pertained to unsecured loans that were alleged to be accommodation entries. The assessee, Blue Circle Speciality Chemicals Pvt. Ltd., provided substantial documentary evidence to prove the legitimacy of the loans. The CIT(A) found no deficiencies in the assessee's submissions and noted that the Revenue failed to establish any direct or indirect link of the assessee's own money flowing out and then being received back as unsecured loans. The Tribunal, referencing similar cases and judicial precedents, upheld the CIT(A)'s decision, emphasizing that the Revenue did not point out any defects or deficiencies in the documents provided by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33011 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Other Referred Cases: Ashok Kumar Banthia v ITO, DCIT v Baiagra Builders Pvt Ltd
• Laws Referred To: Income-tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Search and seizure; Accommodation entries
• Section: 143(3); 68; 133(6); 13

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH MUMBAI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 246/MUM/2024 Assessment Year: 2012-13 Assistant Commissioner Income-tax-2(1)(1, Mumbai Vs. Blue Circle Speciality Chemicals Pvt. Ltd., 34, 1st Floor, Empire Building, 146, Dr. D.N. Road, Fort, Mumbai – 400 001 (PAN : AACCB2216L) (Appellant) (Respondent) Present for: Assessee : Shri Haresh Shah, CA Revenue : Ms. Monika H.Pande, SR.DR Date of Hearing : 18.12.2024 Date of Pronouncement : 13.03.2025 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the Revenue is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, vide order no. ITBA/APL/S/250/2023-24/1058259461(1), dated 28.11.2023, passed against the assessment order by National e-Assessment Centre, Delhi, u/s. 143(3) r.w.s.147 of the Income-tax Act (hereinafter referred to as the “Act”), dated 26.12.2019 for Assessment Year 2012-13. 2 ITA No. 246/Mum/2024 Blue Circle Speciality Chemicals Pvt. Ltd., AY 2012-13 2. In all the four grounds raised by the Revenue, the issue contested by it is in respect of deletion of addition made u/s. 68 of Rs.2.50 crores in respect of unsecured loans availed by the assessee which is alleged to be accommodation entry. 3. Brief facts of the case are that, assessee is engaged in the business of manufacturing of chemical products namely Saccharin, Sodium Saccharin, etc. It filed its return of income on 31.03.2014, reporting total income at Rs.7,20,389/-. Re-assessment proceedings in the case were initiated by issuing notice u/s. 148, dated 10.03.2019 on the basis of some information from the office of Deputy Commissioner of Income- tax, Central Circle – 3(1), Kolkata, vide letter dated 01.03.2019, received by the ld. Assessing Officer that a search and seizure operation u/s. 132 was conducted in the case of Shri Praveen Agarwal on 13.09.2012. On the basis of this search and seizure action, it is alleged that Shri Praveen Agarwal is one of the entry operators engaged in providing accommodation entries and assessee is one of the beneficiaries of the loan transaction availed by it from the following Companies as tabulated below: Sl. No. Name of Co. Date of the transaction Amount Rs. 1. Esquire Enclave P. Ltd. 25/10/2011 50,00,000 2. Everlike Projects P. Ltd 31/10/2011 - Rs. 50 lacs 31/10/2011 - Rs. 50 lacs 1,00,00,000 3. Kingfisher Properties P. Ltd 25/10/2011 1,00,00,000 Total- 2,50,00,000 3 ITA No. 246/Mum/2024 Blue Circle Speciality Chemicals Pvt. Ltd., AY 2012-13 3.1. Assessee was called upon to explain the nature of transaction and establish identity and credit worthiness of the lender companies as well as genuineness of the transaction. Assessee submitted the details along with corroborative documents including ledger extracts, copy of bank statements, loan confirmation letters, copy of income-tax return acknowledgement, audited financial statements of the lender companies, copy of confirmation of loan repayment, which forms part of the paper book placed on record. Assessee strongly submitted that the said loans were repaid in Assessment Year 2016-17, details of which were placed on record which establishes the genuineness of the transaction as well as explains the source of such funds. Ld. Assessing Officer also issued notices u/s. 133(6) to the three lender companies seeking details of the transaction undertaken by them for furnishing relevant documentary evidences. In this respect, Ld. Assessing Officer noted in para -4.6 of the impugned order that he received physical compliances from all the three lender companies by post which were carefully considered and placed on record. Ld. Assessing Officer has also taken note of fact of repayment of the loans taken by the assessee to all the three lender companies. Thus, after considering the report of DCIT, reply of the assessee and information collected against notices issued u/s.133(6) of the Act, ld. Assessing Officer drew adverse conclusion by placing reliance on the statement of Shri Praveen Agarwal recorded during the course of his search. Ld. Assessing Officer took note of modus operandi undertaken by Shri Praveen Agarwal to conclude that the transactions undertaken by the assessee with the three lender companies are not genuine but accommodation entries. He thus, treated the loans taken by the assessee from the three said companies as unexplained cash credit since assessee failed to prove the identity, 4 ITA No. 246/Mum/2024 Blue Circle Speciality Chemicals Pvt. Ltd., AY 2012-13 credit worthiness and genuineness of the impugned loan transaction. Aggrieved, assessee went in appeal before the ld. CIT(A). 3.2. Before the ld. CIT(A), assessee reiterated all the submissions made in the course of assessment along with documentary evidences which were analysed in detail by the ld. CIT(A). He took note of the fact that all the relevant documentary evidences from each of the three lender companies were placed on record, no deficiency or discrepancy were pointed out in the submissions made. It is also important to note that all the three lender companies had furnished details along with documentary evidences in response to notices issued u/s.133(6), fact of which is duly noted by the ld. Assessing Officer in his order. Ld. CIT(A) also noted that there is nothing brought on record by the ld. Assessing Officer to show that transactions of unsecured loans are coupled with similar contra transaction in cash. He, further noted that ld. Assessing Officer could not establish that there was any direct or indirect link of assessee’s own money flowing out and then again being received back in the form of unsecured loans except for placing reliance on the general statement of Shri Praveen Agarwal, recorded in the course of his search. 3.3 Relevant observations and findings arrived at by ld. CIT(A), in this respect, is reproduced below: “9.13 Now coming to the facts of the case, it is observed that the confirmations, ITRs, audited financial statements and bank statements of the relevant parties Esquire Enclave Pvt Ltd, Everlike Projects Pvt Ltd and Kingfisher Properties Pvt Ltd have already been filed before the Assessing Officer during the course of the assessment proceedings to support the impugned transactions. The AO infact made independent inquiry by issuing notices u/s 133(6) of the Act and the AO has himself acknowledged that necessary compliance was made by way of filing of the documents called for. It is observed that the identity of the share applicants is proved by the ITRs. Further, the genuineness of the transaction can also be safely concluded from the confirmations filed and since the entire transaction has been done through the banking channels, duly recorded in the books of accounts of the assessee and duly reflected in the financial statements of the assessee. Further, the creditworthiness or financial strength of the share applicants is 5 ITA No. 246/Mum/2024 Blue Circle Speciality Chemicals Pvt. Ltd., AY 2012-13 proved from the audited financial statements of the share applicants wherein it is observed that they had sufficient balance in their accounts to enable them to advance the relevant loans. It is noted that the AO has not been able to bring on record any evidence to show that the unsecured loan entries are coupled with similar contra-transactions in cash. The conduct of the relevant parties also does not lead us to an inference that each unsecured loan entry was coupled with a contra cash transaction. The AO has not taken his inquiry to the logical conclusion where it could be established that there was any direct or indirect link of appellant's own money flowing out and then again being received by the assessee in the form of unsecured loans except relying on the general statement of Sh. Pravin Agarwal. The Hon'ble Mumbai ITAT in the case of Ashok Kumar Banthia v ITO (ITA No. 2192/Mum/2018 order dated 13.03.2019) in a similar case, where the assessee had received entries from a similar entry operator group i.e the Pravin Jain Group, had granted relief to the relevant assessee where the assessee had discharged the initial onus cast upon it u/s 68 to prove the identity, genuineness and creditworthiness of the relevant transactions. Similarly, relief has been granted by the Hon'ble Mumbai ITAT in the case of DCIT v Baiagra Builders Pvt Ltd (ITA Nos. 4691 & 4692/Mum/2015 order dated 14.09.2017) wherein the assessee had taken entries from Pravin Jain Group but had discharged the onus cast upon it u/s 68 to prove the identity, genuineness and creditworthiness of the relevant transactions. 9.14 In view of the detailed discussion above and the in view of the relevant judicial pronouncements, I find that the assessee has duly discharged the onus cast upon it u/s 68 of the Act to prove the identity, creditworthiness and genuineness of the transactions by producing the relevant documents and so the addition of Rs. 2,50,00,000/- made by the AO u/s 68 of the Act is directed to be deleted. Accordingly, these grounds of appeal are allowed.” 3.4. On the relief granted by Ld. CIT(A), Revenue is in appeal before the Tribunal. 4. We have heard both the parties and perused the material on record and give our thoughtful consideration to the submissions made before us. It is a fact on record that assessee has furnished all the documentary evidences, as called for by the ld. Assessing Officer. He has also taken note of the fact of all the three lender companies making physical submissions in respect of details called for by issue of notices u/s. 133(6). Further, ld. Assessing Officer has also taken note of the fact that assessee has repaid the loan to all the three lender companies in Assessment Year 2016-17. Case of the assessee was reopened based 6 ITA No. 246/Mum/2024 Blue Circle Speciality Chemicals Pvt. Ltd., AY 2012-13 on information received from the Investigation Wing pertaining to search conducted in the case of Shri Praveen Agarwal, where his statement was recorded and which formed the basis for making the addition by the ld. Assessing Officer whereby, assessee is alleged to be a beneficiary of taking accommodation entry in the form of unsecured loan from companies controlled and managed by Shri Praveen Agarwal. 4.1. From the perusal of the paper book and documents placed therein, relevant documentary evidences to establish the identity and credit worthiness of the lender companies and genuineness of the transaction are placed on record. We also take note of the elaborate and well reasoned findings arrived at by ld. CIT(A) after taking into consideration, details and documents furnished by the assessee as well as those collected by assessee for which relevant extracts are already provided above. We also note that ld. CIT(A) has referred various judicial precedents, while granting the relief to the assessee. 4.2. We also note that ld. Assessing Officer could have taken adverse view only if he could point out the discrepancy or insufficiency in the evidences and details furnished in his office. It is a settled position of law that once the assessee has produced documentary evidences to establish the existence of lender companies, the burden would shift on the Revenue to establish its case. Ld. Assessing Officer has not bothered to discuss or point out any defect or deficiency in the documents of the three lender companies furnished by the assessee as well as by the respective lender companies directly to the ld. Assessing Officer in response to notices u/s.133(6) of the Act. These evidences furnished have been neither controverted by the ld. Assessing Officer during the assessment proceedings nor anything substantive brought on record to 7 ITA No. 246/Mum/2024 Blue Circle Speciality Chemicals Pvt. Ltd., AY 2012-13 justify the addition made by him. Thus, going by the records placed by the assessee for all the lender companies, it can be safely held that assessee has discharged its initial burden and the burden shifted on the ld. Assessing Officer to enquire further into the matter, which he failed to do so. It is also noted from their audited financial statements that all the lender companies have sufficient owned funds available with them to lend the assessee. It is also pertinent to note that the legislature in its wisdom brought amendment in section 68 w.e.f. 01.04.2013 to specify that the assessee needs to prove the source of source only in case of share capital. In case of other receipts, there were no such provisions until Assessment Year 2022-23, after which the amendment has been made prospectively from Assessment Year 2023-24 to also include loan or borrowing. Accordingly, for the year under consideration, there was no requirement to prove the source of source of the party from whom unsecured loan had been received. 5. Considering the facts on record and detailed discussion made above and the findings arrived at by ld. CIT(A), we find that assessee has duly discharged the onus cast upon it, u/s.68 of the Act, to prove identity and credit worthiness of the lender companies and genuineness of the transaction. Accordingly, we do not find any reason to interfere with the findings arrived at by ld. CIT(A), for deleting the addition of Rs.2.50 Crores, made by ld. Assessing Officer u/s.68 of the Act. 5.1. For the above findings, we take note of the decision of Coordinate Bench of ITAT, Mumbai in the case of Ashok Kumar Banthia v ITO (ITA No. 2192/Mum/2018 order dated 13.03.2019), where the assessee had received entries from a similar entry operator group i.e., the Pravin Jain Group, had granted relief to the relevant assessee where the assessee 8 ITA No. 246/Mum/2024 Blue Circle Speciality Chemicals Pvt. Ltd., AY 2012-13 had discharged the initial onus cast upon it u/s 68 to prove the identity, genuineness and creditworthiness of the relevant transactions. Similarly, relief has been granted by the Coordinate Bench in the case of DCIT v Baiagra Builders Pvt Ltd (ITA Nos. 4691 & 4692/Mum/2015 order dated 14.09.2017) wherein the assessee had taken entries from Pravin Jain Group but had discharged the onus cast upon it, u/s 68 to prove the identity, genuineness and creditworthiness of the relevant transactions. Accordingly, grounds raised by the Revenue are dismissed. 6. In the result, appeal of the Revenue is dismissed. Order is pronounced in the open court on 13 March, 2025 Sd/- Sd/- (Saktijit Dey) (Girish Agrawal) Vice President Accountant Member Dated: 13 March, 2025 MP, Sr.P.S. Copy to : 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 5 Guard File CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai "